English Practice Questions on International Finance Chapter_6INTERNATionAL FINANCEAssignment Problems 6 Name Student# I Choose the correct answer For the following questions only O

ng in as the counterparty in the futures market, while in the forward market the counterparty is known and chosen by the participants directly.

B. Futures contracts are standardized and traded on organized exchanges, while forward contracts are customized and traded in the OTC market.

C. Futures contracts require physical delivery of the underlying currency, while forward contracts do not.

D. The size of a futures contract is usually much larger than that of a forward contract.

Which of the following is NOT a potential benefit of using currency options for hedging exchange rate risk?

A. Options provide flexibility in terms of the amount of underlying currency that is hedged.

B. Options allow the holder to benefit from favorable exchange rate movements while limiting potential losses from unfavorable movements.

C. Options provide a fixed exchange rate at the time of the option contract, providing certainty in future cash flows.

D. Options can be used to hedge against both appreciation and depreciation of the underlying currency.

A. American option

B. European option

C. Bermuda option

D. All of the above are types of currency options.

A. The option holder has the right, but not the obligation, to sell the underlying currency at a specified strike price.

B. The option holder has the right, but not the obligation, to buy the underlying currency at a specified strike price.

C. The option holder has the obligation to buy the underlying currency at a specified strike price.

D. The option holder has the obligation to sell the underlying currency at a specified strike price.

Which of the following is NOT a factor that affects the price of a currency option?

A. The current spot exchange rate

B. The strike price of the option

C. The time to expiration of the option

D. The size of the contract

Which of the following is a potential disadvantage of using currency options for hedging exchange rate risk?

A. Options may expire worthless if the exchange rate moves in an unfavorable direction.

B. Options require the payment of a premium, which represents an additional cost.

C. Options provide less flexibility than forward contracts in terms of customizing contract specifications.

D. All of the above are potential disadvantages of using currency options